The apparent killing of 47-year-old Kenji Goto -- the second beheading of a Japanese hostage in a week -- was announced in a video released online that included no mention of a Jordanian pilot also being held by IS, whom the jihadist group has threatened to kill.
Goto, a respected freelance journalist, is seen in an orange outfit -- similar to those worn by Guantanamo Bay inmates -- kneeling next to a standing masked man who speaks with a British accent and blames the Japanese government for his "slaughter".
The executioner addresses Abe, saying the murder was the result of "reckless" decisions by the Japanese government and would mark the beginning of "the nightmare for Japan".
The brief video ends with the image of a body dressed in orange with a decapitated head on top of it.
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Abe vowed to "never forgive terrorists" after news of the video broke early Sunday morning in Japan.
"I am extremely angry about these heinous and despicable terrorist acts. We will never forgive terrorists," the premier, who appeared on the verge of tears, told reporters.
Goto's distraught mother said she "can't find the words" to describe her son's death.
"I can't find the words to describe how I feel about my son's very sad death," a sobbing Junko Ishido told reporters.
Goto's brother Junichi Goto said he had been holding out hope, "But that's not possible anymore," he was quoted as saying by public broadcaster NHK.
US President Barack Obama led international condemnation of the "heinous murder".
"Through his reporting, Mr Goto courageously sought to convey the plight of the Syrian people to the outside world," Obama said.
Tokyo and Washington said they were working to confirm the video's authenticity.
"After an extensive review, we believe it's highly probable" it is real, government spokesman Yoshihide Suga said in response to a reporter's question.
British Prime Minister David Cameron denounced the apparent killing as "a further reminder that ISIL (IS) is the embodiment of evil, with no regard for human life.